Canada Mortgage and Housing Corporation recently announced a 35 year
mortgage. Apparently the “thinking” behind this new plan is,
“You can buy more house with energy-efficiency upgrades with the
same income”. Apparently the “savings”, due to the lower
monthly payments because of the longer amortization period can be applied
to energy-efficient upgrades.

Before you run off to try and save the planet from carbon dioxide build
up, lets look at the numbers and see what this “plan” will
cost you. Lets use a $300,000 mortgage at 5%
with monthly payments (CMHCs example) even though most people now know
the accelerated weekly payment mortgage is the optimum way to go in order
to save the most in interest costs.

The “savings” each month that can be used for energy-efficient
upgrades over the next 35 years is $240.55. The extra interest you would
pay is $108,345 over the 35 years, compared to the higher monthly payments
over the 25 years. Lets assume you go with the 35 year plan, but decide
to invest the $240.55 per month in a financial vehicle that paid “5%
per year” for the next 35 years, instead of energy–efficient
upgrades? As you can see the accumulated monthly
outlay of $240.55 for 35 years would give you $270,193 inside a tax
free vehicle (RRSP).

This initial and simple analysis should alert home buyers that the good
intentioned “savings” plan needs further in depth analysis
before jumping in with both feet and walking away from $270,000!!!